[Jeff W]

Barron,

Right now our knowledge is not advanced enough to use my 5-Factor Model. Kurtosis is perhaps an insoluble problem, however the other 4 factors should be reasonably quantifiable with time.

IIRC, Harry Kat was able to reproduce a set of Volatility, Skewness, Kurtosis specifications out of sample(but not return). Note that all these are compensated risks--to decrease kurtosis you have to sacrifice by decreasing return or increasing volatility or negative skewness. Of course, we can't truly capture black swan events.

Research is being done on human capital risk, but for the moment we can only think of it in a qualitative sense. Human capital, like any other asset, is a part of your portfolio and for many people it's the biggest part, yet it is largely ignored.

I have mainly investigated this area as regarded the small value premium. Stocks with smaller market cap and/or low price/book levels have a high correlation with the average person's human capital, which may explain their high risk-adjusted returns.

As far as implementing this model... I can't help you. [img]/images/graemlins/grin.gif[/img] For my purposes, it is enough to just consider the 5 factors and make some effort to manage my risks.